The results on knowledge depreciation have important implications for both opera- tional and strategic decisions in organizations. On the operational side, depreciation has important ramifications for forecasting, planning, and scheduling. If knowledge depre- ciates, forecasts based on the conventional learning curve will systematically overesti- mate future productivity. The gap between an organization’s actual and predicted productivity can cause major problems for the organization, including poor relations with customers and failure to make significant gains in market share. If the gap between actual and predicted productivity is high, the organization might never reach the point where its production program is profitable (e.g., see the Lockheed case). Thus, knowl- edge depreciation has important implications for operational decisions in firms.
Knowledge depreciation also has important implications for the strategic behavior of firms. If knowledge depreciates, recent output is a more important predictor of current productivity than cumulative output. Thus, knowledge depreciation lessens the benefits of having a large stock of accumulated knowledge. Under conditions of knowledge depreciation, a recent entrant to an industry would not be disadvantaged relative to firms with a large stock of cumulative output. Knowledge depreciation could explain in part how Korean semiconductor firms that started production in the 1980s, which was much later than their counterparts in the USA and Japan, achieved significant positions in world markets by the 1990s (Cho, Kim, & Rhee, 1998).
Several researchers have argued that forgetting can be functional in organiza- tions (e.g., see Easterby-Smith & Lyles 2011). De Holan and Phillips (2004) identified four modes of organizational forgetting with two underlying dimensions (1) accidental versus purposeful; and (2) focusing on newly acquired versus previ- ously embedded knowledge. Although accidental forgetting typically harms an organization’s performance, De Holan and Phillips (2004) argued that purposeful forgetting can improve organizational performance. The latter form of forgetting has been referred to as “unlearning” (Hedberg, 1981; Nystrom & Starbuck, 1984).
By contrast, I would argue that unlearning is a form of learning: the organization learns that what worked in one context does not work in another. That is, the orga- nization refines its understandings and elaborates its response repertoires to take into account various contingencies. Rather than purge the past, it is useful to retain it, while recognizing that past experience might not be appropriate for current con- ditions. How to retain knowledge in organizational memory is a challenging issue. It would not be efficient or even possible for all members of an organization to retain knowledge about what worked and what did not work under various condi- tions in the past. That knowledge, however, should be retained in repositories at the organizational level so that the organization avoids repeating mistakes from the past or reinventing solutions already developed. For example, Hargadon and Sutton (1997) showed how knowledge of prior designs retained in an organization’s mem- ory facilitated innovation. Organizational memory is discussed in the next chapter.
Source: Argote Linda (2013), Organizational Learning: Creating, Retaining and Transferring Knowledge, Springer; 2nd ed. 2013 edition.